New $8,000 Credit for 1st Time Homebuyers

We just discussed the $7,500 credit in the previous post, but yesterday President Obama signed the $787 billion stimulus bill that includes a new $8,000 first time homebuyer tax credit. This tax credit is similar to the previous plan in that it hopes to stabilize home prices, but the incentives have changed considerably.

The biggest change is that the $8,000 credit is NOT an interest free loan and is now refundable. Previously, you were required to payback the $7,500 tax credit over 15 years. Now, you will receive a one-time credit of $8,000 that you will not have to payback. If you are owed a refund, this amount will be added to your refund amount. This is not the case with the $7,500 tax credit.

Many of the requirements are the same as previously stated; the house must be a owner occupied, you cannot have purchased a home in the last 3 years, and the income maximum of $75,000 (single) and $150,000 (jointly) still apply. If you make over that amount, you may still be eligible for the credit, but at a reduced rate. If you make more than $95,000 or $170,000 on a joint return, you are not eligible at all. What has changed is the timeframe in which you must purchase your home. The previous tax credit was good for houses purchased from April 9, 2008 to July 1, 2009. This new tax credit is only good for homes purchased from January 1, 2009 to December 1, 2009. Additionally, you will have to retain the home for at least 3 years. If you do not, you will have to return the credit to the government.

This new tax credit is significantly more consumer-friendly and many people are upset that this tax credit has not been made retroactive to cover those in the $7,500 tax credit bracket. So if you bought your home from April 9, 2008 to December 31, 2008, you are currently stuck with the $7,500 tax credit, but if you purchased on or after January 1, 2009, this new tax credit will essentially put an extra $8,000 into your pocket. Overall, this credit is overwhelmingly more beneficial than the initial $7,500 credit.

With this new $8,000 credit in place, a large available inventory of homes for sale, as well as historically low mortgage rates, this should push those who were considering buying a home into action. As more programs are put into place to help out potential home-buyers, we will review them as they become available to provide information to our readers.